Yen gains; pound weakens

Tokyo - The yen rose for the first time in five days against the dollar as an opposition lawmaker said his party will oppose Bank of Japan Deputy Governor Nominee Kikuo Iwata, who the market sees as endorsing monetary policy easing.

The euro fell against a majority of its most-traded counterparts before Italy sells bonds tomorrow as the country seeks to resolve a political stalemate.

The pound reached the weakest level since June 2010 versus the dollar and the lowest to the Australian currency since 1985 after industrial output unexpectedly declined.

South Africa’s rand slid to the weakest in almost four years versus the dollar after the nation posted a larger-than forecast current-account deficit.

“It’s about whether the DPJ is going to block Iwata,” Peter Gorra, chief dealer in New York at BNP Paribas SA, said in a telephone interview.

“Dollar-yen sold off about 50 points on that pretty quickly. It’s all about positioning.”

The yen rose 0.2 percent to 96.07 per dollar at 8:57 a.m. in New York after sliding 3.1 percent during the previous four days.

Japan’s currency added 0.3 percent to 125.25 per euro.

The euro weakened 0.1 percent to $1.3040 after sliding to $1.2955 on March 8, the lowest since December 11.

Japan Votes

Iwata may be confirmed even without backing from the Democratic Party of Japan if Prime Minister Shinzo Abe can secure the support of smaller opposition parties.

The central bank can end deflation solely through buying government debt and doesn’t need to purchase riskier assets to meet its inflation target, Iwata said today in parliament.

The DPJ will endorse Haruhiko Kuroda as central bank governor and Hiroshi Nakaso as one of the deputy governors, policy chief Mitsuru Sakurai said today in Tokyo.

Current governor Masaaki Shirakawa will step down on March 19.

The yen has tumbled 8 percent this year, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes.

The dollar rose 3 percent and the euro gained 1.7 percent.

The euro weakened as Citigroup Inc. said Italy may have to hold a new election to resolve a political deadlock created by an inconclusive vote on February 24-25.

The nation is scheduled to sell as much as 7.25 billion euros ($9.5 billion) of bonds tomorrow.

Central Bank

European Central Bank policy makers last week kept their benchmark interest-rate unchanged at 0.75 percent while lowering forecasts for economic growth and price increases.

“In the short term, we in the euro area have, if anything, declining inflation risks,” Bundesbank President Jens Weidmann said in a statement today when the Frankfurt-based central bank released its 2012 annual report.

“You just had Weidmann saying he expects inflation to come down,” BNP’s Gorra said.

“Coming from one of the biggest hawks out there, to me that’s a sign they can cut rates at some point. Again, another negative for the euro.”

The pound dropped for a fifth day against the dollar as the Office for National Statistics said industrial production fell 1.2 percent in January.

The median forecast in a Bloomberg News survey of economists was for an increase of 0.1 percent.

“Momentum is clearly against the pound and if anything that serves as an excuse to carry on, the market takes it,” said Derek Halpenny, European head of global-markets research at Bank of Tokyo-Mitsubishi UFJ in London.

“The weak data backup renewed quantitative easing and it’s a clear recipe for further pound weakness.”

Pound Down

The pound declined 0.2 percent to $1.4888 after sliding to $1.4832, the lowest level since June 23, 2010.

Sterling fell 0.1 percent to 87.59 pence per euro and weakened 0.6 percent to 1.4417 versus Australia’s dollar.

South Africa’s current-account shortfall was 6.5 percent of gross domestic product in the fourth quarter, versus a revised 6.8 percent in the previous three months, the central bank said.

Economists surveyed by Bloomberg predicted it would shrink to 6.3 percent.

“It is a bit of a shocker for the rand,” said Mohammed Nalla, head of strategic research at Nedbank in Johannesburg.

“The worry is that the previous number was revised upwards. That’s a very large negative.”

The rand slid 0.5 percent to 9.1382 per dollar after weakening to 9.2122 per dollar, the lowest since April 2009. - Bloomberg News